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Business Insurance Product Liability Insurance

Product liability insurance tailored for your products and business

You need product liability insurance if you sell goods to the public or other businesses. Companies are responsible for what they sell. Do you manufacture or sell goods in Ontario or another province? You could be liable if your product makes someone ill, is defective or causes injuries.

Product liability insurance can help protect your business against product-related allegations and lawsuits. It can also mitigate losses from legal action resulting from faulty consumer goods.

At ThinkInsure, we will help you get affordable product liability insurance. We’ll help you reduce risk and protect your business. Contact us to compare quotes from the top providers in Canada to save more.

3 things to know about product liability insurance

  • Product liability insurance is not mandatory but is highly recommended if you sell products.
  • Product liability covers damages and bodily injury from manufacturing defects, contamination, and improper labelling.
  • Product liability plans can be customized based on your industry and product offerings.

What is product liability insurance?

Product liability insurance is a type of liability coverage for companies that sell or manufacture goods. It protects against bodily injury claims and third-party property damage caused by goods sold to customers, vendors, businesses, and third parties. You have protection against damages from manufacturing, design, marketing and incorrect labelling.

Do I need product liability insurance in Canada?

You need product liability protection if you sell, manufacture, or distribute products in Canada. You need coverage as soon as you start selling goods to the public or other companies. This includes brick-and-mortar and online retailers. There is a possibility of a lawsuit if something goes wrong. So, ensure all parties you work with have coverage. This insurance gives you the protection to withstand potential issues.

What types of businesses need product liability insurance?

two women are looking at products in a small shop.

Any corporation, SMB, home-based business, or entrepreneur that sells items should have this protection. Whether you sell food, clothing, furniture, tools, sports equipment, shoes, or anything else, this insurance is for you.


Any large or small business that sells directly to customers and the general public (online or offline) requires protection. This includes:

  • Vendors, wholesalers, distributors
  • Bakeries, variety stores, grocery stores, pet stores
  • Restaurants, coffee shops
  • Gift shops, florists
  • Clothing stores, shoe stores


If you produce an item and sell it to other businesses, you still need this coverage :

  • Publishers, software developers
  • Website developers and graphic designers
  • Material suppliers, equipment suppliers
  • Manufacturers, product developers

How does product liability insurance work?

Product liability works similarly to other business liability products. Coverage kicks in when there is a claim that your product causes damage or harm to a third party.

Owners file a claim to activate this protection. It covers legal representation and court fees up to the policy limit and can also cover the cost of damages awarded in a lawsuit.

Overall, it protects against lawsuits from customers and others who claim a defect or malfunction caused injury or damage.

How does product liability insurance protect my business?

Even with your best efforts, there is always a chance you could find yourself getting sued - justifiable or not. The cost of court proceedings and potential payouts could have a significant financial impact on your company. Product liability coverage protects your financial interests. You’ll pay less out of pocket for legal fees and damages, helping you maintain financial stability.

What does product liability insurance cover?

It pays for legal fees and damages because of faulty product claims. Common situations include:

  • Goods that cause bodily injury to customers or end users.
  • Malfunctions that cause property damage.
  • Food or beverages that cause food poisoning or illness.

What does product liability not cover?

Certain exclusions are not part of a policy:

  • Warranty
  • Recall and replacement costs
  • Intentional violation of government regulations
  • Professional negligence
  • Industry penalties and fines
  • Customer service-related claims

How much does product liability insurance cost?

On average, you can expect to pay about 25 cents per $100 of retail sales. For example - you sell $500,000 worth of goods each year. You can expect to pay about $1,250 annually. Costs could be higher if you sell more dangerous items. Premiums could be lower if you sell low-risk products.

What factors impact product liability insurance costs?

The potential danger associated with your goods will significantly impact how much you pay. Here are some of the top factors that will impact costs :

  • The type of products
  • Number of units sold
  • Size of distribution
  • If products have a history of causing danger to customers
  • Industry and company size
  • Policy limits
  • Your insurance claims history
  • Factors related to shipping, packaging, storage, safety measures in place and more

What are some ways to get cheaper product liability insurance?

Finding ways for you to lower your premiums is what we do best. Here are some simple tips to implement to get lower premiums for your policy:

  • Understand your threats: No two products are the same. Understand your potential risk factors and exposure. Take steps to reduce your risk and make products safer for your customers.
  • Speak with an advisor: Our commercial insurance brokers can provide you with expert advice and guidance.
  • Compare quotes: Comparing your options allows you to see what insurers can offer and who has the lowest price.
  • Shop around to explore options: Understand the types of coverage available to your business from different insurers.

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Product liability insurance FAQs

There is a difference between physical products and digital products. Digital products require media liability coverage. This protects you if you sell or distribute digital content such as online courses, e-books, and other digital products. Contact our team if you are unsure which coverage applies to your products. We’ll ensure you have the proper protection.

The amount you require will depend on the size and reach of your business. The more you sell, the higher coverage limits you should have to protect yourself. Limits can range from as little as $500,000 to $5 million or more.

You should have this protection if you sell any type of goods (food, clothing, gadgets, etc.). A policy will protect your company against legal action arising from any issues.

Product liability is a specialized type of general liability. The difference is that product liability covers damage caused to other people by your products. General liability provides financial assistance if someone sues you because they are accidentally injured on your property, such as if they slip and fall.

Some general liability insurance policies may also include basic product liability coverage. If you sell something specialized or riskier, additional protection may be required.

Businesses are not legally required to have product liability insurance. However, commerce partners, suppliers, and manufacturers may require you to have it as part of your business agreement.

Product liability insurance claims examples

woman cooking burger by placing it on microwave oven

The products you sell can be a liability in several ways. There are four common types of allegations made that lead to product liability claims:

Manufacturing Flaws

An issue with the manufacturing process caused a malfunction. You are at risk if a product were to break or malfunction during use. If it causes an injury or damage, a lawsuit could be filed.

Example: A microwave, that, when left on for too long, shorts out and starts a fire.

Design Defect

The design is considered unsafe and should never have been introduced to the market in its current condition.

Example: Manufacturing toys with sharp edges – potentially causing cuts and scrapes to kids.

Insufficient Warnings Or Directions

There was not a proper warning or safe use instructions. Failure to provide warnings and instructions on how to use the item could cause injury or damage.

Example: Household cleaners do not include proper storage instructions, which could cause them to react to other chemicals or environmental factors.

Illness/sickness caused by food or beverages

Food and beverage providers, restaurants, and food service companies can face liability claims if customers fall ill after consuming products. This can be caused by spoiled food, contamination, and foodborne illnesses such as listeria or salmonella.

Example: A patron at your restaurant gets food poisoning after eating seafood that was off. Or, a customer purchases canned goods from the grocery store and includes them in a dinner recipe. Their family falls ill afterward. Then your company finds there was a contamination issue during production.

What if you don’t have product liability insurance?

Product liability claims can arise whether you have proper insurance or not. It's the nature of being in the goods industry. If a claim is filed against your business and you are found liable, you would have to pay the damage out of pocket if you didn't have insurance. Depending on the claim size and damages, your business could be in jeopardy of shutting down. Product liability insurance provides financial protection and legal representation so your business can sustain such claims.

a young woman looking at products on a shelf in a store

Get a quote for product liability insurance today

Get the best product liability insurance from Canadian insurers. We offer many options regardless of your industry or the type of products you sell.

Get a quote today and save more! Call toll-free 1-855-550-5515 or request a quote online.

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